The House That Didn't Burn Down

This customer I'm doing the electrical work for mentioned that one of his exterior lights didn't work, and hadn't worked for months. After ruling out a bad bulb, socket, or lightswitch, I determined that power was making it to the lightswitch and out of the lightswitch, but no power was making it to the light fixture.

Damn. Time to tear into the walls and look for where the mouse chewed through the Romex. Once the wires were exposed, it was easy to find where the staple had been pounded through the cable, cuz the wire was fused to it, and the 2x4 stud was all burned and charred around it. They must not have been at home when all the arcing occurred, because they never smelled anything burning. Lucky for them, the house didn't burn down. Oh yeah, and the breaker never tripped either.

Since the breaker didn't trip, my question is: What kind of bad scenarios will trip a breaker and what kind of scenarios (like this one) will not?

There are some new standards for breakers that are specifically designed to detect arcing.

Reminds me of a college lecture for freshman electrical engineering students given by a professor who was also a volunteer fireman, who posed a question about a burnt-up fusebox in a barn. High resistance in the old screw-in fuse receptacle led to arcing and heat buildup, with a fire coming next on the menu. Useful instruction that was, since some months later, a soft buzzing noise in the basement of a rented house led me to a water-heater fuse-and-switch that was arcing and getting kind of warm.